Local governments in Michigan are bracing for more revenue cutting. Last Friday, the state legislature approved a measure that would repeal Michigan’s so-called ‘Personal Property Tax.’
The tax on industrial and commercial equipment and furniture generates more than $1 billion annually, much of it for services in cities, counties and townships around the state. The measure—backed by the state’s business sector--currently awaits Governor Rick Snyder’s signature. WKAR’s Mark Bashore checked in with Lansing Mayor Virg Bernero about its impact.
MARK BASHORE: Even with the Governor’s signature, the measure won’t take effect until after Michigan voters weigh in on a revenue replacement measure in 2014. Bernero says the PPT brings in between $3.5 and $4 million yearly for Lansing. He says around 60 percent of it is spent on police and fire. He calls the repeal “a solution in search of a problem.”
MAYOR VIRG BERNERO: It is stunning that the state government would do this to local government. You’ve got the state—just passed a new emergency manager law to allow them to go in and fix the finances of a city and yet they’re pulling the rug right out from underneath us. Cities are barely holding on and they’re going to cut another 10, 20 percent of a city’s budget, depending on the condition of a city?
BASHORE: Now this revenue is going away, but we’re told that a lot of it will be compensated for with other monies. How do you interpret that?
BERNERO: It’s what you call ‘fuzzy math.’ OK? It doesn’t add up. It doesn’t add up and they won’t even tell you it adds up. I mean, they’re telling you ‘you might get 80 percent back.’ Again, it’s the height of irresponsibility. To come to local governments—here in Lansing, we’ve absorbed $60 million, just in the last few years, in revenue sharing cuts. And this is true around the state. Cities, townships, counties have absorbed revenue sharing cuts from the state. At the same time, property tax revenue is in decline. And that’s something none of us can do anything about, immediately. So we’re trying to absorb these hits already. So instead of helping us, instead of state government coming and saying ‘how can we help local government?,’ they’re pushing us off the financial cliff. It’s unbelievable. And then they’re saying maybe, you might get 80 percent back, and that’s dependent on some new law that the public has to pass.
The whole thing is speculative. They want to be able to say they helped business. This is nothing but politics. They’re playing Russian roulette with local governments' budgets. In two years, it could be a $1 million hit to our budget. Now that’s the city of Lansing and we have a little bigger budget than a lot of other cities, but we too are in financial distress. We’ve been able to keep our head above water, but to come and do this to us so they can get the political credit and the political gamesmanship of saying ‘Look at what we did for business. Oh, and by the way, at the local government (level), you can get some of your money back if you want to assess a local tax.' So they maybe have given us the ability to maybe raise some tax. We still will never get to 100%. And not to mention the growth in these revenues that would have taken place.
BASHORE: Now backers say this eases the tax bite on businesses so they could grow and hire more people. What’s wrong with that approach?
BERNERO: Uh, I think that’s a great notion. But we have to govern in real time, on a day-to-day basis. It may be that five years from now, you start to see some positive impact from this. But I have to govern and put police cars on the street and answer 9-1-1 calls today, tomorrow, next week. And I’m getting a cut of a half-million to a million dollars in very difficult times. And one of the things that businesses want, we know--every survey shows--they want good roads. They want police. They want a safe neighborhood, they want fire, they want emergency services. They want the same things that our neighbors want.
BASHORE: Apparently the public, as you referred to earlier, will have a chance to weigh in on this thing. It will come in August, 2014. A ‘use tax’ revenue vote. That sounds huge. What is your take on that?
BERNERO: The one thing we got out of this is that if that fails, then the whole thing falls apart and it reverts to the status quo, so I know how I’ll be voting. I think we ought to go—the municipalities--and mount a big campaign against that thing so that we can just keep the status quo until they come up with something better.
You know, the first rule in the practice of medicine for a doctor is ‘First, do no harm.’ This does not pass the test.
BASHORE: You’re already under a lot of budget pressure. The last I heard, an $11 million projected deficit for fiscal year 2013. Is that number getting higher by any chance?
BERNERO: No, it’s getting better. We’re enjoying a recovery. Lansing is leading Michigan’s recovery. That was a very preliminary thing. You know, as soon as we have it, we let people know, but we also let people know when it looks better. And so I think now we’re probably closer to $9.5 to $10 million.